HDFC CEO explains the slowdown in loan growth

Keki Mistry, Chief Executive Officer (CEO) at Housing Development Finance Corporation (HDFC) on Friday said that the overall loan growth has been impacted by reduction in non-individual loans. Mistry's comments came after HDFC loan growth was seen slowing down in the third quarter of FY23. The growth in the individual loan book was 18 percent, while that in the total loan book on an Asset Under Management (AUM) basis was 13 percent.

For the uninitiated, non-individual loans are used for purposes other than personal or domestic purposes. These can be entities, corporate companies and NGOs.

During the quarter ended December, HDFC assigned loans amounting to Rs 8,892 crore to HDFC Bank. Loans sold in the preceding 12 months amounted to Rs 35,937 crore . The collection efficiency for individual loans on a cumulative basis stood at 99 percent during the nine-months ended December 2022.

A bulk of the loan book growth came from the individual loans segment, where there was a 26 per cent growth, he said, adding that the average ticket sizes have also gone higher at Rs 35.7 lakh per loan.

Mistry said the restructured loans have also declined to 0.7 percent of the book from a peak of 1.4 percent. It set aside Rs 370 crore as loan impairment charges for expected credit losses, which was down from Rs 393 crore a year ago and Rs 473 crore in the preceding September quarter.

On Net Interest Income (NIM), HDFC CEO said that it has been in the range of 3.3-3.5 percent over the last 10 years. The NII came in at Rs 4,840 crore, versus Rs 4,284 in the same quarter of FY22.

He further said the profit growth has been restricted due to rate hikes by the Reserve Bank of India (RBI), explaining that while the company's liabilities get repriced faster, it takes a while for the assets to reflect the newer rates. He said the transmission lag between the asset and liability repricing is generally one quarter, and the company will start reporting better growth numbers thereafter.

He said he feels the RBI is through with a bulk of its rate actions and may only do another 0.25 percent hike, and added that the demand for housing remains robust.

Now, Mistry is expecting interest rates to go up with the lending rates. Interest rates are increased once in every 3 months.

He is also expecting cost of funds impact to neutralise in the coming quarters.

On merger with HDFC Bank, Mistry told CNBC-TV18 that the same will be completed by June/July. While NCLT hearing will get completed today, RBI is yet to respond to their forbearance request.